Borrowers Don’t Choose Mortgage Lenders for the Best Interest Rate

Conventional wisdom would lead us to believe that consumers go with the mortgage lender that offers the lowest interest rate. This appears to not be the case…

In fact, it’s the least common reason why a borrower selects a particular home loan lender, which is pretty shocking considering how much money is at stake.

I suppose this is the power of marketing, taking a very boring product that is for all intents and purposes a commodity and selling it for more.

Referrals, Referrals, Referrals…

When it comes to home purchase loans, which are all the rage these days with refinance volume tanking, a referral from a real estate agent or builder is the top reason (53%) why a borrower chooses a certain lender, this according to data from STRATMOR for the 12-month period ending June 30th, 2018.

The survey results are part of its MortgageSAT Borrower Satisfaction Program, which the company claims is the mortgage industry’s only “Borrower Satisfaction measurement tool.”

This isn’t the first time I’ve mentioned how important and influential referrals are in the mortgage business.

Relationships Fuel More Refinances

Again, with the path of least resistance, in most cases (56%) the borrower simply returns to the lender where they previously got a loan. Makes sense right.

Why venture out and deal with the unknown, especially if the interest rate is only an .125% or .25% higher?

Well, there are thousands of reasons why, but it’s only money…

The next most common driver was, you guessed it, a referral, cited by 15% of respondents. This includes family members and friends.

It was followed by referrals from real estate agents or builders with a 7% share. Surprising they even got that since they’re not directly involved in a refinance, but shows the power they still wield.

Next up was best interest rate, taking the fourth spot, slightly better than dead last, with a massive 6% share.

Yes, six out of 100 consumers choose a mortgage lender to refinance with because they offer the best mortgage rate. Wow.

Last time I checked, interest rate was a pretty darn important detail when it comes to a refinance, but what can you do.

It narrowly beat out positive online reviews, which held an equally dismal 3% share.

The takeaway here is that consumers should really pay more attention to interest rates, while also ensuring that the lender they choose to work with is above board and capable.

For loan officers, mortgage brokers, and lenders, it’s actually great news because the survey shows borrowers aren’t all that interest rate sensitive, and really drives home the importance of referrals and keeping in touch.